Month: September 2014
You earn more in the financial sector because of rent-sharing
We again looked at those individuals moving into and out of the finance sector, but this time restricted the sample only to those doing a job with the same title in both the finance and non-finance sectors, focusing on generic job titles such as ‘function manager’, ‘ICT professional’, ‘secretarial’, ‘customer service’ etc. The results reveal that the same people doing the same job earn around 20% more when doing that job in the finance sector rather than the non-finance sector. This premium is observed to be remarkably similar whatever job title is considered – whether it is a typically high-paid or low-paid job. This suggests that the pay premium is ubiquitous across all individuals working in the finance sector. This idea is further supported by looking at the wage premium at various points of the wage distribution. Although the finance sector pay premium is observed to be the largest between high earners in the finance and non-finance sectors – at the top end of the wage distribution – it is certainly the case that it is also observed throughout the full distribution.
That is from Joanne Lindley and Steven McIntosh, there is more here. As you will grasp from basic microeconomics, this is evidence of rents and rent-sharing in the financial sector, a conclusion which the authors second.
Scott Sumner is perhaps a Japan pessimist
If you want to know what Japan is up against consider that Japanese RGDP has grown by 0.00% per year over the past 6 1/2 years. In contrast, Germany, the shining star of the European economy, has grown at 0.5% per year over the past 6 1/2 years. Then consider the fact that the Japanese workforce is falling at an accelerating rate, and unemployment is already at the lowest level in decades. How fast do you expect Japan to grow? Negative growth will be the norm; zero growth is the new “economic miracle.”
The post is here.
Why has Piketty’s *Capital* sold so many copies?
There is a symposium in The Guardian on that question, here is my short contribution:
Thomas Piketty’s Capital in the Twenty-First Century has been a hit for several reasons, most notably the quality of the work. But I’d like to focus on a neglected reason why the book has found so much support, namely it appears to strengthen the case for redistribution.
Most previous commentators focused on income inequality. Bill Gates or JK Rowling have earned more than CEOs or authors in the past, while incomes in the middle class or lower middle classes are often stagnating below what previous generations could expect. That’s a labor market issue – namely that some individuals are not very much demanded by employers.
The obvious questions are then a) how can we make low-earners more productive, and also b) how can we improve education?
Perhaps most importantly, as these issues get processed by the public there is a common attitude – whether justified or not – that many of the lower earners are partially or fully responsible for their own plight. The egalitarians don’t tend to win these policy debates.
In the simplest version of the Piketty model, wealth grows more quickly than does the economy as a whole and thus the picture changes. The relative losers are no longer low earners but rather anyone who is not a capitalist. Any disparity is due not to their shortcomings in labor markets but rather to their lack of a high initial endowment.
Furthermore redistribution will work like a charm, at least provided the redistribution is enough to give the poorer individuals some capital to invest.
If you are an activist who favors lots of redistribution, the Piketty story is a lot easier to tell yourself and to tell your audiences – and that is yet another reason for its popularity.
The other contributions are by Brad DeLong, Stephanie Kelton, and Emanuel Derman, who cannot bring himself to read the book.
Simple facts on state colleges and universities
Susan Dynarski writes:
Public colleges are collecting about the same revenue per student today as they were 25 years ago. In 1988, educational revenue per full-time-equivalent student at public colleges was $11,300; in 2013, it was $11,500. (These amounts are adjusted for inflation and are expressed in 2013 dollars.)
Then why is tuition up? The answer is pretty simple:
In 1988, state legislatures gave their public colleges an average of $8,600 a student. Students contributed an additional $2,700 in tuition, which gets us to a total of $11,300. By 2013, states were kicking in just $6,100, while students were contributing $5,400; this gets us to a total of $11,500.
As far as students are concerned, public tuition has doubled. As far as public colleges are concerned, funding is flat.
The full column is here.
*Philosophy Between the Lines*
This is the new and fantastic book by Arthur M. Melzer and the subtitle is The Lost History of Esoteric Writing. It is the best book I know on esoteric writing and its history and furthermore it is clear and to the point! (I think)
Melzer starts his chapter eight with this quotation from John Toland’s eighteenth century Pantheisticon:
[Esotericism is] practiced not by the Ancients alone; for to declare the Truth, it is more in Use among the Moderns.
Here is another bit from the book:
To begin with, we need an author who, in his interpretations, is willing to follow the very un-Straussian injunction — often found on mathematics exams — “show all work.” We need to see, once or twice, how the sausage is made. The best writing for this purpose that I am familiar with comes from an appropriately un-Straussian source: Stanley Fish. His “Georgics of the Mind: The Experience of Bacon’s Essays” is a brilliant and nuanced exercise in textual analysis that openly displays, at every stage of Fish’s encounter with the text, what he thinks and why he thinks it.
…Another excellent and highly communicative reader…is Robert Connor. His Thucydides is a very sensitive reading of Thucydides’s great history, a reading openly arrived at and clearly conveyed. In conjunction with this, one should also read Clifford Orwin’s superb The Humanity of Thucydides.
Recommended.
The doubts are growing on Abenomics
Edward Hugh has a good post on this topic, here is one excerpt:
…there is simply no way incomes can rise across the entire economy because the baby boomers are now retiring to be replaced by fewer young workers with post labour reform entry-level wages. Japan’s overall consumer spending power will therefore fall, rather than rise as Abe hopes. “Individual companies may offer wage increases, but because of demographics it is simply impossible to increase the total amount that is paid out in wages,” says Obata. “On the contrary, that amount will shrink.”
And Japanese exports, after an initial boost, have flattened out, not good news. Here is a further Edward Hugh post on the Japanisation of Europe.
Assorted links
What is the market failure in data storage and protection at the retail level?
There’s been another accident and data leak from Home Depot, and some people are claiming the company was negligent, so I was thinking what kind of market failure might be present.
One problem is this. They store your credit card number whether you buy one thing at the store or make fifty trips over the course of two years. So, if you don’t trust a store, at the margin you only get one chance to make a decision whether to give them your credit card number by shopping there or not. You are comparing the total expected consumer surplus from having a relationship with the store at all against the data privacy risk. Such blunt, once-and-for-all trade-offs are not always conducive to good marginal incentives.
If I made one purchase at Home Depot a year ago, I don’t seem to obtain more safety by refusing to make more purchases now, at least provided I am using the same credit card. So many consumers have little incentive to turn against the lax retailer and so excess laxity persists.
The data protection market might work better if, in case you would make more shopping trips to the more trustworthy stores, that in turn would lead to your data being marginally better protected. A bit like eating more of your meals in safer restaurants to minimize the chance of getting sick. But the logic of storage, based on a one-time receipt of the critical information, means these marginal choices don’t matter so much (they should matter more for people who lose their credit cards a lot and get new reissued cards with new numbers, or matter more to the extent the company sequentially constructs separate databases; bravo to you if you lose your credit cards a lot, you are conferring a social external benefit on others by inducing companies to care more about data protection at the margin).
Ideally we would like a system where the intermediary would reissue a new credit card number to you each time you buy something.
In the meantime, the incentive is to concentrate all of your retail purchases on one card, and use that card somewhat indiscriminately at the margin. At the same time you should concentrate all of your auto-renewals on a different card. You would then hold one or two other cards in reserve, as back-ups for when these first-tier cards fail you.
I sometimes think that all of my credit card information is stolen, all of the time, for practical purposes. My only protection is then the ubiquity of theft, the large number of competing credit cards available for use, and the incentives of the stationary bandit not to reap too high a harvest from the stolen information too quickly. What is then the size of the “tax” I pay each year and how does it compare to standard yearly credit card fees? After all, the credit card companies, they have my credit card number too.
Are you up for another, less cooperative round?
Just hours after Scotland voted “no” to independence from the United Kingdom, Catalonia’s regional parliament announced on Friday that it had passed a law, which Catalan leaders say authorizes them to hold a non-binding “consultation” on independence from Spain in November.
The law was passed with a vote of 106 to 28.
Spain’s central government and Spanish Prime Minister Mariano Rajoy, however, categorically oppose Catalonia’s campaign for a referendum, as the Spanish constitution doesn’t allow referendums that don’t include all Spaniards.
There is more here, and much more here. My view is that we’ve been getting lucky on these European political events — in relative though not absolute terms — and sooner or later that streak of good fortune is bound to end.
Might world population actually just keep on growing?
The excellent Kevin Lewis points us to a new paper in Science by Patrick Gerland, et.al.:
The United Nations recently released population projections based on data until 2012 and a Bayesian probabilistic methodology. Analysis of these data reveals that, contrary to previous literature, world population is unlikely to stop growing this century. There is an 80% probability that world population, now 7.2 billion, will increase to between 9.6 and 12.3 billion in 2100. This uncertainty is much smaller than the range from the traditional UN high and low variants. Much of the increase is expected to happen in Africa, in part due to higher fertility and a recent slowdown in the pace of fertility decline. Also, the ratio of working age people to older people is likely to decline substantially in all countries, even those that currently have young populations.
The paper is here, gated for some of you. A variety of summaries and forms of coverage can be found here. That is good news for those who buy into Julian Simon, bad news for those worried about environmental sustainability.
New York (Texas and Tennessee) fact of the day
The median household income in the city of New York is a few hundred dollars a year more than the median household income in the state of Texas, but in practical terms the average New York City household is much worse off.The most obvious issue is the cost of housing, which for New Yorkers is about four times what it is for Texans.
That is from Kevin Williamson, who stresses that New York City is actually a relatively poor place.
By the way, New York and DC have Ginis reflecting more inequality than what we find in Mexico or Nigeria. Manhattan and Putnam County, Tennessee have Ginis almost as high as that of South Africa.
Have I mentioned that a Gini coefficient isn’t a very good measure of inequality for most purposes? It does not command much loyalty from people who actually work in that area (generalized entropy measures are much more popular), yet it has become a staple of discussion in popular economics.
Assorted links
1. Megan McArdle watches Srugim.
2. An orangutan learns how to fish.
3. The historic Timothy Leary debate at MIT.
4. How to discriminate against preexisting conditions.
5. Optimistic vs. pessimistic dogs.
6. How people have tried to stop lava, with a little more success than I would have thought, though not a lot.
The new Obama plan to combat antibiotic overuse
The Obama administration on Thursday announced measures to tackle the growing threat of antibiotic resistance, outlining a national strategy that includes incentives to spur the development of new drugs, tighter stewardship of existing ones and a national tracking system for antibiotic-resistant illness. The actions are part of the first major federal effort to confront a public health crisis that takes at least 23,000 lives a year.
The full story is here.
The Hill has more detail. It is an executive order:
The president’s directive creates the Task Force for Combating Antibiotic-Resistant Bacteria, co-chaired by the secretaries of Defense, Agriculture and Health and Human Services.
The group is charged with implementing a plan to track and prevent the spread of antibiotic-resistant bacteria, promote better practices for the use of current drugs and push for a new generation of antibiotic medications.
To that end, the White House on Thursday announced a $20 million prize “to facilitate the development of rapid, point-of-care diagnostic tests for healthcare providers to identify highly resistant bacterial infections.”
The added incentive and the timeframe given to the task force indicate the urgency with which the administration is acting, said Dr. Eric Lander, who co-chairs the President’s Council of Advisors on Science and Technology.
“This is a pretty tight timeline to now come up with a national game plan,” Lander said.
There is also this:
In December, the Food and Drug Administration (FDA) unveiled a plan to phase out the use of antimicrobials for the purpose of fattening chickens, pigs or other animals destined for human consumption. But the plan relies in part on voluntary industry cooperation, and advocates argue the government’s efforts are lagging behind even some industry players.
Here is the new full 78 pp. report to the President on antibiotic resistance (pdf).
This initiative — or its failure — is potentially a more important health issue than Obamacare, yet it will not receive 1/1000th of the attention. Without reliable antibiotics, a lot of now-routine operations would become a kind of lottery.
Here are previous MR posts on antibiotic resistance. I would note it is difficult to judge such a plan at the current level of detail. It is better than nothing, but any initial plan is going to be not nearly enough, relative to an ideal. By the way, Alex tells me there is also a British prize, discussed here.
Kabaddi, or the culture that is India
Breath control is the essential skill for success in kabaddi, a game with ancient roots in which teams take turns sending a raider across midcourt who, on a single breath, tries to tag a member of the opposing team and return safely to his team’s half of the court before taking another breath. To prove to officials that he or she is not inhaling, the raider must chant “kabaddi, kabaddi” throughout the attack. The best players can do it for several minutes.
Kabaddi’s rules would seem irredeemably arcane until one learns that 435 million Indian television viewers watched the Star Sports Pro Kabaddi League during its inaugural five-week run this year. Or that the league’s final attracted, for however brief a duration, 86 million Indian viewers, surpassing the tallies for the 2014 World Cup and the Wimbledon finals.
There is more here, from The New York Times, the article also explains the Thai sport of sepaktakraw. Here is Wikipedia. You can watch (and hear) some kabaddi here.
Ireland is finally seeing some catch-up growth
Ireland’s economy is now growing at its fastest rate in seven years, according to the latest Quarterly National Accounts.
The figures, published this morning by the Central Statistics Office, show the economy expanded by 7.7 per cent in GDP terms in the year to the end of June.
This is the strongest rate of annualised growth recorded in the economy since early 2007.